Week 2 Assignmentâ€”IFRS Adoption

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Week 2 Assignmentâ€”IFRS Adoption Abstract Over 120 countries are adopting the IFRS. Canada one of that countries accept a decision to adopt IFRS in 2006, and in 2011 adopt. Switching from the Canadian GAAP (CGAAP) took time and was not easy. Most of the capital markets are adopting the IFRS, and I believe that the US SEC should start merging the US GAAP and the IFRS and start educating the professionals and financial statements users on the new sets of standards because important for a US capital market participant to be financially bilingual. Week 2 Assignmentâ€”IFRS Adoption In today world, the convergence of a single set of accounting standards is taking place, and these sets of standards are the IFRS. Canada is one of the many countries that adopted this set of standards; it changed from the Canadian GAAP to the IFRS. The legal adoption of the IFRS in Canada took place in the year 2006, but the effective application date wasnâ€™t until 2011! This process takes time and is costly. IFRS is now required for public and private companies in Canada, so these companies had to become educated and learn everything about these sets of standards for accounting reporting. The transition to the IFRS may be distruptive for the Financial Statements users because there are differences between the GAAP and the IFRS that may impact sections presented on the financial statements which may lead to differences in ratios computed. After the transition, the Canadian government contended that at the aggregate level, IFRS adoption does not significantly change the central values that describe the financial position and performance of Canadian companies reported in financial statements and that the volatility of financial statement figures is in most cases higher in IFRS than in CGAAP. The transition had made it easier for Canada to access the capital markets of the world. One of the important differences that Canada faced with this transition was the cumulative effect on retained earnings. Firms were required use IFRS reporting standards in their financial statements, so they had to restate a lot of elements. The difference between the pre and post- IFRS adoption impact would be revealed on its statement of financial position, specifically through its retained earnings. Canadian firms restated all their assets and liabilities under the new standards. The net difference between assets and liabilities valued under the â€œoldâ€ and â€œnewâ€ standards were reported in the change in net assets. The adoption of IFRS only affected two components of equity (net assets): retained earnings and accumulated other comprehensive income. My personal opinion is that the US SEC should mandate the adoption of IFRS. A worldwide set of accounting standards would make it much easier for US companies to analyze potential acquisitions. They would also reduce costs for businesses to list on foreign exchange markets by eliminating the need for preparation of financial statements in that foreign marketâ€™s reporting requirements. The US SEC requires GAAP to be used as the reporting method for US companies that list their stock on the NY Stock Exchange, and does not allow foreign companies to use IFRS reporting when trading their securities in the US. With IFRS, I feel that the US economy could benefit immensely from a larger, more profitable stock market. I also feel we could benefit from the increase in exports. The US imports more goods than they export, leaving the country in debt to other countries without the sufficient exportation income to cover these costs. IFRS could be the key to more overseas business, higher US profits, and ultimately reduce our nationâ€™s debt. Having global business accounting standards breaks down the language barrier not only in terms of the language spoken, but more importantly, the accounting language spoken. Simply put, one language is easier to learn than two or more. As an accountant, I pe

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